Question

16 marks) Wulston 334 marks) Better Life Hospital purchased an X-ray machine on 3 April 2019 at a cost of $405 The estimated useful life of this machine was five years and estimated residual van imated residual value was $24,000. The management estimates that the machine can take 300,000 pictures during the useful life. Workings are required for the answers below. (a) Compute the depreciation expense of the X-ray machine at the year-end on 31 December for 2019 and 2020 by using the methods below, (1) (ii) Straight-line (with depreciation calculated to the nearest whole month), 200%-declining-balance (with half-year convention), Unit-of-output (number of pictures taken: 30,000 in 2019; 18,000 in 2020). (0) Straight-line Method Depreciation expense (ii) 200%-declining- balance Method Depreciation expense (iii) Units-of-output Method Depreciation expense Year 2019 2020 (18 marks) (b) Assuming that on 1 October 2021, Better Life Hospital had added a new component of $100,000 to the X-ray machine for enhancing the speed of X-rays to reduce the radiation exposure. The installation cost was $6,000. The company revised the estimated useful life of the machine from five years to seven years with residual value of $33,400. Better Life Hospital adopted Straight-line method to the nearest whole month) as in (a)(i) above. The company updates the depreciation expenses monthly. (1) Compute the book value of the machine at 1 October 2021 after upgrade. (2 marks) (ii) Compute the revised depreciation expense for the month of October 2021. (2 marks) (C) Assume that Better Life Hospital adopted 200%-declining-balance (with half-year convention) as in Part I (a)(ii) above. On 4 September 2020, the company sold the machine for $360,000 cash. The Company adjusts the depreciation expenses annually in December. (4 marks) (i) Prepare journal entry to record the depreciation expenses in 2020. (8 marks) (ii) Prepare journal entry to record the disposal on 4 September 2020.

Answer 1

Solution Data available: sila Date of purch are = 03 Apr '19 Costa $468000 2 life is syrs. Residual value = $24,000 2 . No. of pics can be takein = 300,000 pies. straight line method is goo 19 Depreci atien pia. = (4 68000 - 20000)|5 = $88,800 i ? 1 Year 2019 2020 Depi Exp l dos ! 88,800.9112: = 66,600 $ 88,800 i 200% declining balance method og Dep. raté 100 % X2 512 40% 5 Depi berp.. 468000 x 40% X9112 = $140,000 t Yearly Ò 2019 Balance as at 12/31/19 = 468000 - 140480 = $327,600 327,600 x 40% - $ 131,040. 2020 Kanned with im Scanner

delom Küll Unit Of Output Method Dep. exp Par pic = (468,000.- 24,000 per pic - 81.48 300000 Year 2019 2020 Pics takon 30.000 18,000 Rate lins 1.464 Dep. Exp Sunroo 0:26,640 (5) Data aucilable in cost of component = $100,000 stallation = $6.000 Revised useful life = tys. 3. Method = straight line Book Value as at 12/31120 = (468000 - 66.600 - 88.800) $312.600,7 Dop. exp 09/30/21. from oloil21 till 88,800 2.9112 $66,600:1 CORONA Book volue as at 01/10/21, before upgrade (312 600 - 66,600) $246.000 _ Bolance waeful life = 5y93 - (413\19 to 09 (50|21) Syo -_2.5 you 2.5 yrs csscnned with CamScanner

Yu Date: 11 - Book after To - Value of the machine at 10 101121 upgraded Book Value as at 09/30/21 = $246,000 Cost of compenent = 100,000 of installation $ 352,000 Coll o Revised useful Aurs - 2.sy o sumonths. Dep. Exp for the celuisyo, a sumonths. month of Oct 21 = 352000 su : 8 6519 ( Revired useful life = (Gyro - 2.5yrs) = uisyu = 54m = 54 months | Dep. exp. for the month of Oct '21 (352,000 - 33400) 154 Kanned with CamScanner

c) Dala auculable: Method => 200 % declining balance' Date of pale = 0910420 Sabe value = $ 360,000 On B ook value as at 12/31/19 = $327,600 Dep. Exp from = allaila till o9104/20 327,600 X 40. X 9112 $98,280 - I Book Value as at __ 09104/20 = $37600 -98,280 $229,320 Profit on sale = 360,000 - 229,320 = $130, 680 da Der Depreciation Exponses Dr.. $98,280 Accumulated Dep. Cr.. - Cast Hic Dr. Proft on sale of machinery cr. Cash Acc. Ale Dep. Machinery Profit on Di Dr. Co. $360,000 238.680 C 4680 130,6 sale castanned with dhmScanner